Founder vs. Company: An Interesting Case on Who Truly Owns a Trademark

In a High Court case in Malaysia, Palmgold Leisure Sdn Bhd v. Palmgold Corporation Sdn Bhd, offers a powerful and cautionary tale for founders, entrepreneurs, and business leaders about the critical distinction between creating a brand and legally owning it.

The dispute, which involved companies controlled by a father and son, centred on the rights to the "Palmgold" trademark. While the father's company initiated the legal challenge, the court ultimately ruled in favour of the son's company. The judgment underscores three fundamental principles of intellectual property law that every business must understand.

1. The Creator of a Mark is Not Necessarily Its Owner

This is the cornerstone of the court's decision. The founder (the father) argued that he conceived the "Palmgold" name and logo when he incorporated his company in 1980. However, the court drew a clear legal distinction:

> "While the creator of a trademark may assert copyright ownership to it, common law ownership of a trademark is not based on who had designed and created the trademark but who had first used it in the course of trade."

You can be the brilliant mind behind a brand's identity, but legal ownership is established not by creation, but by first use in commerce. This shifts the focus from a conceptual idea to tangible commercial activity.

2. The Company is a Separate Legal Entity – and the Trademark is Its Asset

The founder attempted to oppose the trademark registration through his company, Palmgold Leisure Sdn Bhd, while simultaneously claiming in a statutory declaration that he personally was the proprietor.

The court swiftly dismissed this, reinforcing the doctrine of corporate separateness. A company's assets—including its intellectual property—belong to the company itself, not its shareholders or founders. As the court cited: "the assets of a company do not belong to a shareholder."

When the founder sold his shares in the defendant company to his son, he was only selling his ownership stake in the corporate entity. He was not selling, and could not claim to personally own, the trademarks that the company itself had developed and used. The trademark was an asset of the company, which remained with it regardless of its change in shareholders.

3. Locus Standi: The Right Party Must Bring the Action

This case is a masterclass in how a technicality can derail a entire case. Locus standi refers to the right of a party to appear and be heard before a court.

The plaintiff company started the opposition but then filed a statutory declaration (a sworn statement) stating the founder was the true owner. This was a fatal misstep. The court held that if the founder was the proprietor, as claimed, then he was the correct party to file the opposition, not his company.

By confusing the two legal personalities, the plaintiff undermined its own standing to sue. The court dismissed the case on this basis alone, highlighting that procedural correctness is just as important as the merits of your claim.

Key Takeaways for Your Business:

1. Use It or Lose It (to Someone Else): Don't just create your trademark—use it publicly and commercially as soon as possible. Document this first use meticulously (e.g., dated marketing materials, invoices, website launches).

2. Assign IP to Your Company Explicitly: Ensure that any IP created by founders or employees is formally assigned to the company through agreements. This clarifies ownership and protects company assets.

3. Know Who You Are: Be crystal clear about which legal entity owns and uses your IP. When taking legal action, ensure the plaintiff is the same entity that holds the rights it is trying to enforce.

4. Seek Early Expert Advice: Trademark law is complex. Consult with an intellectual property lawyer early on to structure your IP ownership correctly and avoid costly disputes down the line.

This case reminds us that in business and law, clarity is king. Ensuring your IP is properly owned, used, and protected by the correct legal entity is not just a formality—it is the foundation of your brand's most valuable asset.

What are your thoughts? Have you ensured your company's IP is properly assigned and documented?